Cv Sciences Inc

Greetings and welcome to CVScientist's third quarter 2021 conference call. At this time, all participants are in a listen-only mode and this conference is being recorded. Following the formal presentation, management will take questions from the analyst community. I would now like to turn the call over to CVScientist for an introduction. Please go ahead.

Thank you and good morning, everyone. With us today with prepared remarks are CVSciences Chief Executive Officer Joseph Dowling and Chief Financial Officer Jorg Grasser. I would like to remind you that during this call, management's prepared remarks may contain forward-looking statements, and management may make additional forward-looking statements during the Q&A session. These forward-looking statements are subject to risk and uncertainties that may cause actual results to differ materially from those anticipated by CVSciences at this time. When used in this call, The words anticipate, could, estimate, intend, expect, believe, potential, will, should, project, and similar expressions as they relate to CV Sciences are as such forward-looking statements. Finally, please note that on today's call, management will refer to non-GAAP financial measures in which CV Sciences excludes certain expenses from its GAAP financial results. Please refer to CV Sciences' press release from earlier today for a full reconciliation of its non-GAAP performance measures to the most comparable GAAP financial measures. This morning, November 15th, the company issued a press release announcing its financial results. Participants on this call who may not have already done so may wish to look at the press release as the company provides a summary of the results on this call. The press release may be found at cvsciences.com. Following the prepared remarks, we will open up for Q&A from the analyst community. I would now like to turn the call over to CVSciences Chief Executive Officer, Mr. Joseph Dowling. Joe?

Thank you, Melissa. Good morning, and thank you for joining us for today's conference call. Third quarter results were largely in line with our expectations. Revenue of $5.1 million was down from $5.6 million a year ago, but flat on a sequential basis as we continued to experience trends gradually recovering in key retail channels. We also delivered another solid improvement in gross margin, which was up 200 basis points versus last year. Adjusted EBITDA loss in the third quarter was 2.7 million, down fractionally compared to the third quarter of 2020. The most exciting news from the third quarter is that we are finally starting to see some positive momentum on the regulatory front. The passage of AB 45 in California is highly encouraging, and we are optimistic that it will serve as a model for responsible CBD legislation in other states and eventually lead to federal legislation and regulatory framework. The new California legislation, AB 45, explicitly permits the retail sale of products containing hemp-derived extracts and cannabinoids such as CBD. Prior to this legislation, we have not been able to sell ingestible products to California brick and mortar retailers, including natural product retailers, specialty retailers, and FDM retailers. With the enactment of AB 45, It completely mitigates the severe risk of non-compliance for retailers in California and opens the biggest opportunity in the U.S. from a single state perspective. AB 45 will provide Californians with access to the health and wellness benefits of our safe and effective hemp derived CBD products. We look forward to working with our retail partners to rapidly expand our distribution footprint in California. California is not the only state where we see regulatory progress. During the third quarter alone, we saw new legislation pass or interim guidelines established in several other states, including Alaska, Hawaii, Louisiana, Maine, Michigan, and Nevada. This is great momentum and we believe will lead to other states following along, joining the inevitable nationwide acceptance of hemp derived products at the state level. This momentum will eventually lead to federal legislation and a much needed regulatory framework. The impact of no federal regulatory framework is clear. from data recently published by the Brightfield Group, where the 2021 market, which is estimated by Brightfield at $4.7 billion in revenue in the U.S., is flat when compared with total 2020 revenue. As we stated during our Q1 2021 call, we expected 2021 to be a repositioning year, and that is what is happening. The future CBD market, according to Brightfield and others, is very promising. According to Brightfield, the total addressable market in 2022 is estimated at $5.8 billion, a forecasted 22% increase over 2021. The repositioning of our industry will significantly contribute to future 20% plus growth rates as estimated by Brightfield and others. This repositioning has several elements and some of our thoughts include the following. First, I just spoke about regulatory momentum at the state level. Regulatory certainty is probably the biggest catalyst for our industry and there is momentum at the state level and eventually the feds will come along. Second, the latest data indicates that at its peak, the CBD market was home to roughly 3,500 brands. The most recent estimate is that this number has dropped to nearly 2,000 brands. Still too many, but this is good progress. And third, our industry is still hugely fragmented. Market analysts estimate that only 19% of total CBD sales come from the top 20 CBD companies, which indicates that a significant amount of the total addressable market is still up for grabs. So with further brand contraction and consolidation, We believe the Brightfield addressable market of $5.8 billion in 2022 is achievable and represents growth opportunities for the top companies in our industry, including CV Sciences. Given the current market dynamics, our areas of focus include, first, being as cost efficient as possible and achieving cash flow breakeven in the near term. Second, continue to work on brand awareness, establishing much-needed consumer credibility where quality, safety, and product value is clear and still doing this effectively in a crowded, fragmented space with 2,000 brands all fighting for mindshare. And third, continue to innovate with new products that meet changing consumer demographics preferences and need states. Recent examples of our product innovation include our PlusCBD Calm and Sleep Gummies, specifically addressing critical need states for our customers. During Q3, these two products, along with our Cherry Mango Gummies, received the top three awards from the LA Weekly publication. Early feedback from consumers and retailers is very strong for both our calm and sleep gummies. And most recently, we launched our new PlusCBD Reserve Collection, a full-spectrum product that is intended to provide the benefit of hemp cannabinoids, including CBD and THC, working synergistically for a balanced cannabinoid supplement. Like all of our products, the Reserve Collection is made with the highest quality ingredients from selected batches of hemp extract with a cannabinoid-rich profile that meets the definition of hemp to achieve the PlusCBD Reserve Collection's unique cannabinoid profile. Early feedback from consumers and retailers from our Reserve Collection is very strong. New product innovation is critical to growing our company. In Q3, 40% of our revenue came from products developed in the prior 12 months. Innovation is critical. Consumer demands and needs are changing quickly. Having the right products is essential. Product innovation is a huge focus for us. and we expect to continuously develop and launch new products as the market begins a new growth phase. On our drug development program, we are confident that we have good proof of concept data, good preclinical data, and strong IP protection. Our current focus is completing the manufacturing component in support of clinical trials. We continue to believe that treatment for smokeless tobacco addiction represents a huge unmet market need estimated at over $2 billion. We continue to believe that CBD has a significant role in both consumer and pharmaceutical products. Along with our nicotine cessation program, we are pursuing additional medical indications and compounds for possible drug development with active intellectual property and proof of concept efforts in progress. As we have previously mentioned, we expect to partner our drug programs sometime in the future. In summary, the CBD market has been tough but is changing quickly and we are optimistic about recent developments around regulatory momentum, industry contraction and consolidation, and our own ability to innovate and operate efficiently. Our development pipeline includes many exciting products that we expect to introduce over the next several quarters as we continue leveraging our proprietary know-how. Now, let me turn it over to Jorg to run through our financials.